Gold & Silver News – 3rd Nov 2014

Gold and silver slumped to the lowest since 2010 as the US dollar strengthened on positive US economic data, the Federal Reserve ending asset purchases and an unexpected announcement by the Bank of Japan to boost stimulus.

Gold and silver prices snapshot:

Gold and Silver Bullion Weekly charts:

Source: NASDAQ

The main turning point began on Wednesday, when the US Federal Open Market Committee announced an end to the quantitative easing program. In particular, the Fed’s economic outlook of the labor market was higher than expected. On Thursday a stronger-than-forecast 3.5% rise in the US third-quarter gross domestic product furthered declines in gold. Gold’s decline continued into the end of the week, driven by the Bank of Japan announcing plans to raise its annual monetary base target to 80 trillion yen (USD$723 billion). The news pushed the yen to a six-year low against the US dollar.

Gold dropped 4.9% for this week, the most since September 2013, following a monthly decline of 3.3% in October. For the year, prices have lost 2.6%.

As usual the US dollar appears to be a strong influence on the precious metal. Wallace Ng, from Gemsha Metals said “People are generally looking at the direction of the dollar … a higher dollar depresses prices, and sentiment in the gold market was already weak because of the Fed.”

In more technical terms, Kitco news described Gold as falling below a key chart-support level around USD$1,180 (AUD$1,341.06) an ounce. Gold had previously bounced around this level and this is the first time to close below that level. Silver fell through key support at USD$16 (AUD$18.18).

Looking ahead, the Kitco survey had 22 respondents this week with the majority expecting weakening prices. 14 saw lower prices in the future, one saw prices trading sideways and seven saw higher prices; with some saying gold could see a november bounce from support around the USD$1,150-$1,160 area.

The US dollar will likely continue to influence the yellow metal. Edward Meir, an analyst from INTL FCStone said that “Gold is again confronting the specter of a stronger dollar, rising equity prices and tame inflation, a trifecta that does not bode well for price prospects going into 2015”. Adam Button, editor and analyst at Forexlive.com adds that gold could go lower: “QE and inflation were the catalysts for gold bulls. QE is over and there is no inflation on the horizon”.

Meanwhile both Morgan Stanley and Goldman Sachs reportedly provided an nonpreferential outlook for gold, with Goldman Sachs commenting an expectation for gold prices to drop to USD$1,050 (AUD$1,193.32).

Markets will also be waiting on the European Central Bank meeting next week.